The process of paying the principal and interest on a loan through regularly scheduled installments. Initially, most of each payment is applied toward interest owed, and later in the loan term increasingly applied toward principal.
annual percentage rate (APR)
A measure of interest rate that expresses the cost of a mortgage as a yearly rate on the loan balance. The APR assumes the loan is held for its full term. For adjustable-rate loans, the APR assumes the loan's index doesn't change from its initial value.
An opinion of the value of a property at a given point in time.
A basis point is one one-hundredth of one percentage point. For example, the difference between a loan at 8.25 percent and a mortgage at 8.37 percent is 12 basis points.
A home loan with an interest rate that will remain at a specific rate for the term of the loan. About 75 percent of all home mortgages have fixed rates.
The fee, expressed as a percentage, charged for a loan. The interest rate also helps determine the monthly payment. For adjustable-rate loans, the interest rate may change from its initial level.
A bank, savings institution, or mortgage company that offers home loans.
The first step toward submitting a home loan requires the borrower to itemize basic financial information.
In casual use, a sum of money borrowed to purchase a home at a certain interest rate using the property as collateral. In formal use, a mortgage is the legal document that pledges property as collateral for a loan.
A company that provides home loans using its own money. The loans are usually sold to investors such as insurance companies and Fannie Mae.
A company that matches lenders with prospective borrowers who meet the lender's criteria. The mortgage broker does not make the loan, but receives payment from the lender for services.
The tax write-off that the Internal Revenue Service allows most owners to claim for annual interest payments made on real estate loans.
A lender's preliminary assessment of a buyer's ability to pay for a home, and an estimate of how much the buyer may borrow.
The process of replacing an older mortgage with a new mortgage that has better terms.
The process in which lenders evaluate the risks posed by a particular borrower and set appropriate conditions for the loan.